Biz Quiz Answer
With a question from Prof. Kenneth P. Sinclair, we tested your business knowledge in our 2016 issue of Lehigh Business.
THE SOLUTION:
1. Buy Gas Burners Outside
16,000 grills X 2 gas burners each = 32,000 gas burners
32,000 burners X $9.25 each = $296,000
2. Make Gas Burners Inside
Direct materials | $200,000 | |
Direct labor | 100,000 | |
Variable overhead | 50,000 | |
$350,000/40,000 burners = $8.75 per burner | ||
X 32,000 burners | $280,000 | |
Inspection, setup, and material handling | ||
$100 per batch X 32 batches this year = | $3,200 | |
($4,000 last year/40 batches last year= $100 per batch) | ||
(40,000 burners last year/1,000 burners per batch = 40 batches last year) | ||
Machine rent | $8,000 | |
Total | $291,200 |
3. Decrease in net income, if LEHIGH CORPORATION buys the gas burners outside: $4,800
($296,000 outside cost - $291,200 inside cost)
The random winner of this issue's Biz Quiz is Samantha Femia '15. Congratulations!
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